State Farm, Commissioner Dale make deal on reopening Mississippi claims

I must say, I am impressed. This is the kind of thing that I was criticizing State Farm for not doing, but they not only did it, they did it in a fashion that made plaintiff lawyer Dickie Scruggs look unnecessary and somewhat, well, foolish is a harsh word, but it might fit these circumstances.

What I’m talking about is State Farm’s agreement with Insurance Commissioner George Dale to  voluntarily reopen thousands of claims in coastal Mississippi — in essence, much of the end result of the failed class action certification and settlement involving Scruggs in the Woullard case.  Here’s a story on developments from Lavonne Kuykendall of Dow Jones Newswires. As you may recall, Judge Senter shot down the class settlement on January 26.  After a later hearing in which Scruggs and State Farm again failed to convince Senter, Scruggs withdrew his motion for class certification, giving some sort of "I didn’t want to play anyway" speech in his withdrawal notice on the way out the door.

This deal with Dale is not as good for State Farm as the Woullard settlement in several respects. It has no provision for binding arbitration, one of the features that disquieted Senter because it is not in policyholders’ insurance contracts, and the claims process is purely voluntary by policyholders.  If they don’t like State Farm’s offer, they can reject it and sue.  This process therefore fails to achieve an important goal for any insurer: finality and certainty.  That makes it even more impressive that State Farm is going ahead with this renewed claims investigation — an admission that, whether their earlier claims adjustment process was flawed or not — State Farm has been branded public enemy number one by many and needed to do something outside the courtroom to address that image. Obviously State Farm’s talks with Dale had been going on for some weeks, and if Scruggs didn’t know of them, he at least saw State Farm’s attentions had moved elsewhere, because his withdrawal notice criticized State Farm’s lack of effort in reviving the Woullard class action.

Also, this has to be a sweet moment for Dale, whom Scruggs has portrayed as some ineffectual toady of insurance companies.  Dale is up for re-election this fall, and Scruggs is working against him. 

2 Comments

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2 Responses to State Farm, Commissioner Dale make deal on reopening Mississippi claims

  1. Kim D

    Do you think that by re-opening each claim and extending an additional offer to policyholders State Farm will in some cases be reducing their exposure to future litigation by pointing to the fact that they offered additional payment for wind, etc, regardless of the policyholder accepting it?
    In the Broussard case State Farm made no payment for wind damage and Senter didn’t even let it go to the jury. In Gemmill, State Farm initially denied payment and then quickly made an additional payment for the wind damage prior to the trial. If State Farm is able to show that they attempted to make a payment for what they felt was the appropriate portion of wind damage to the structure, will it make it more difficult for a homeowner to prove that their claim was improperly denied?

  2. An insurance company only acts for one of two reasons: it thinks something will reduce liability or it thinks it will enhance its brand loyalty over time. I’d say this action falls into both categories, or at least that State Farm hopes so. When you think about the magnitude of all Katrina payouts by insurers — $56 billion is a figure I’ve heard — and State Farm’s website says it has paid out roughly $3.3 billion in Alabama, Mississippi and Louisiana due to Katrina. If they can get finality outside of litigation, they would love to do that. As far as a p.r. move, this is better than the class action settlement, because it has the look of being gratuitous, even though of course it isn’t.
    On the bad faith denial, to know what exactly I think about what are the lessons of Broussard, I’d have to know what State Farm paid in the Gemmill punitive damages settlement. Then I’d know whether State Farm thinks paying the wind money out in Gemmill was a get out of jail free card or just whistling past the graveyard. As Senter said, there were some differences between the cases, but I’d have to say one big difference is that in Broussard, once Senter found State Farm owed something, he decided there was no question of fact for the jury because it was undisputed they paid nothing. So it appears that you are correct that paying some amount of wind damage gives a better chance to get to the jury, but for State Farm, that may be like getting past a motorcycle gang only to run into a squad of Ninjas.
    As far as burden of proof or sufficiency of proof, I don’t see the wind payment as affecting that issue.